More and more Taiwan companies or joint ventures are seeking a domestic A-share listing on China's stock exchanges, mainly to raise funds to help them survive in China's fast-changing, increasingly competitive market, a capital broker said yesterday.
Taiwan businessmen who have operations in China have felt an increasing pressure to seek A-share listing on the Shanghai Stock Exchange or the Shenzhen Stock Exchange, according to Liu Fang-rong (
Among a variety of reasons for selling shares in China, Liu said Taiwan businesses are forced to do so due to cash restraints as a result of China's efforts to cool its overheated economy, and the difficulties in acquiring sufficient capital from Taiwan.
The appreciating Chinese yuan and China stocks' comparatively higher price/earnings (P/E) ratios were also factors for Taiwan companies to seek share sales across the Taiwan Strait, he added.
Liu, whose firm operates financial consulting services in both Taipei and Shanghai, said that first of all, China's measures to cool its economy have made life much harder for China-based Taiwan companies in terms of obtaining loans and borrowing cash.
Secondly, the China-based Taiwanese companies have experienced difficulties in securing funds from Taiwan due to the government's 40-percent ceiling policy aimed at controlling the amount of Taiwan capital that flows into China. This policy has also dampened these companies' willingness to seek listing back on Taiwan's stock market, he noted.
On June 23, Premier Yu Shyi-kun ordered stock regulators to propose plans to allow China-based companies funded by Taiwanese investors to sell shares in Taiwan, but no action has been taken yet.
Thirdly, the appreciating Chinese yuan and its potential to stay strong in the months and even years ahead is another incentive spurring the Taiwan companies to seek A-share listings on the mainland.
China stocks' relatively higher P/E ratios -- higher than those in Singapore, Hong Kong and Taiwan -- is the fourth factor leading the Taiwan companies to seek listing on China's stock exchanges, Liu said.
Even though China's P/E ratios are relatively higher, they are currently at their lowest levels in eight years, representing a golden opportunity for investors to return to the market before a definite bottoming-out, he added.